{"id":101826,"date":"2017-02-07T10:52:12","date_gmt":"2017-02-07T15:52:12","guid":{"rendered":"http:\/\/countingpips.com\/?p=101826"},"modified":"2017-02-07T05:52:38","modified_gmt":"2017-02-07T10:52:38","slug":"why-productivity-growth-is-trumps-biggest-challenge","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2017\/02\/why-productivity-growth-is-trumps-biggest-challenge\/","title":{"rendered":"Why Productivity Growth Is Trump\u2019s Biggest Challenge"},"content":{"rendered":"<div id=\"inves-838006216\" class=\"inves-below-title-posts inves-entity-placement\"><div id =\"posts_date_custom\"><div align=\"left\">February 7, 2017<\/div><hr style=\"border: none; border-bottom: 3px solid black;\">\r\n<\/div><\/div><p>By <a href=\"http:\/\/WallStreetDaily.com\/\"><u>WallStreetDaily.com<\/u><\/a> <img loading=\"lazy\" decoding=\"async\" class=\"attachment-home-th size-home-th wp-post-image\" style=\"display: block; margin-bottom: 5px; clear: both;\" src=\"https:\/\/s3.amazonaws.com\/wallstreetdailywebsite\/wp-content\/uploads\/2017\/02\/0217_growth_feature.jpg\" sizes=\"auto, (max-width: 580px) 100vw, 580px\" srcset=\"https:\/\/s3.amazonaws.com\/wallstreetdailywebsite\/wp-content\/uploads\/2017\/02\/0217_growth_feature.jpg 580w, https:\/\/s3.amazonaws.com\/wallstreetdailywebsite\/wp-content\/uploads\/2017\/02\/0217_growth_feature-300x155.jpg 300w\" alt=\"Why Productivity Growth Is Trump's Biggest Challenge\" width=\"580\" height=\"300\" \/><\/p>\n<p>President Trump\u2019s biggest foe isn\u2019t the liberal media.<\/p>\n<p>Nor is it illegal immigrants spilling over a weak U.S. border.<\/p>\n<p>It isn\u2019t the Red Army amassing in the South China Sea, either.<\/p>\n<p>Oh, and Obamacare looks quite innocent in contrast to the greatest threat to Trump\u2019s presidency.<\/p>\n<p>What could possibly be so daunting?<\/p><div id=\"inves-935386349\" class=\"inves-in-content inves-entity-placement\"><hr style=\"border: 1px solid #ddd;\">\r\n<div id=\"inpost_ads_header\">\r\n<p style=\"font-size:10px; float:left; color:#666;\">Free Reports:<\/p><\/div>\r\n<div id=\"inpost_ads\"> \r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/1ApBOV\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2018\/06\/graph_techs_PD.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t     <a href=\"https:\/\/goo.gl\/1ApBOV\"><b><u>Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p><br><br>\r\n<br>\r\n<br>\r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/f3RrHX\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2019\/01\/cot_pie_80.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t    <a href=\"https:\/\/goo.gl\/f3RrHX\"><b><u>Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p><br><br>\r\n<\/div>\r\n<hr style=\"border: 1px solid #ddd;\">\r\n<br><\/div>\n<p>It\u2019s simple, really\u2026<\/p>\n<p>Productivity.<\/p>\n<p>Take a look at the chart below and you\u2019ll notice that U.S. productivity growth is a crapshoot at best:<\/p>\n<p class=\"centered\"><img loading=\"lazy\" decoding=\"async\" class=\"centered aligncenter\" src=\"https:\/\/s3.amazonaws.com\/wallstreetdailywebsite\/wp-content\/uploads\/2017\/02\/productivitychart.png\" alt=\"U.S. productivity growth crashes in fourth quarter\" width=\"540\" height=\"380\" \/><\/p>\n<p>Are your eyes bleeding yet?<\/p>\n<p>Bottom line: Productivity is far too weak for the American economy to hit desirable levels above 3%.<\/p>\n<p>Yet you\u2019ll recall that President Trump categorically insisted during his campaign that he would raise GDP growth anywhere from 3.5\u20134% on the low side to 5\u20136% on the high side.<\/p>\n<p>Last week, I underscored the similarities between <a href=\"https:\/\/www.wallstreetdaily.com\/2017\/01\/31\/trump-reagan-and-the-secret-silver-mine-in-mexico\/\"><strong>Trump\u2019s and Reagan\u2019s first days in office<\/strong><\/a>. Let\u2019s hope the two administrations diverge on productivity. That is, because productivity suffered during the Reagan years.<\/p>\n<p>I asked my senior analyst, Martin Hutchinson, to see if President Trump has a card up his sleeve to boost productivity \u2014 the foremost driver of economic growth.<\/p>\n<p>Did Hutchinson discover an ace of diamonds? Or a two of clubs?<a name=\"video\"><\/a><\/p>\n<p>Click below to find out.<\/p>\n<p>Smart investing,<\/p>\n<p>Louis Basenese<br \/>\nChief investment strategist, <i>Wall Street Daily<\/i><\/p>\n<hr \/>\n<p><script src=\"\/\/fast.wistia.com\/assets\/external\/E-v1.js\" async><\/script><\/p>\n<div class=\"wistia_responsive_padding\" style=\"padding: 56.88% 0 0 0; position: relative;\">\n<div class=\"wistia_responsive_wrapper\" style=\"height: 100%; left: 0; position: absolute; top: 0; width: 100%;\">\n<div class=\"wistia_embed wistia_async_l22q32xml0 videoFoam=true\" style=\"height: 100%; width: 100%;\"><\/div>\n<\/div>\n<\/div>\n<hr \/>\n<p><strong>Question:<\/strong> Martin, we\u2019re all wondering how President Trump is going to achieve faster economic growth. Can you shed some light on this for us?<\/p>\n<p><strong>Martin Hutchinson:<\/strong> Well, I\u2019m sure President Trump\u2019s wondering it too. What he needs to do to get faster economic growth is to get productivity growth up. Without productivity growth, we will get poorer, not richer, because we\u2019ll produce less for each hour we work.<\/p>\n<p>And in 2016 through the third quarter, productivity growth was zero. Which is an appalling number. The first estimate of first-quarter GDP wasn\u2019t wonderful either. It was only 1.9%. And 1% of that was inventories piling up, which doesn\u2019t do you a lot of good.<\/p>\n<p>Productivity growth has been lousy for some years now. It\u2019s only 0.6% per annum since 2011. When you can compare that with the past \u2014 I mean back in the golden days, 1948\u20131973, it was 2.8% per annum. And it was 1.9% in 1973\u20132010. So it\u2019s been dropping for a long time, but it\u2019s dropped off pretty sharply in the last five\u2013six years.<\/p>\n<p><strong>Question:<\/strong> OK so, productivity clearly is the key here. But why\u2019s it been so lousy, and what can be done to improve it, Martin?<\/p>\n<p><strong>Martin Hutchinson:<\/strong> There are three possible explanations out there. One is from Professor Robert Gordon, who says we\u2019ve invented all the good stuff. And so as we invent less and less that\u2019s really good, productivity growth slows to zero.<\/p>\n<p>Peter Thiel said the same thing: that when we were kids, we thought we\u2019d all have flying cars by now, and all we got was 140 characters \u2014 the thing you have for Twitter. It looks plausible at first sight, that \u2014 but I don\u2019t believe it. If you look around, the number of developments coming \u2014 like driverless cars \u2014 it\u2019s going to have a huge effect on productivity, particularly driverless trucks.<\/p>\n<p>Then there\u2019s robotics. That\u2019s clearly going to vastly improve productivity. Then there\u2019s genetic engineering in the slightly longer term, which can also have all sort of effects of productivity.<\/p>\n<p>Those are all big things equivalent to electricity or the automobile \u2014 or even the computer \u2014 that will make a huge difference.<\/p>\n<p><strong>Question:<\/strong> That\u2019s the big one, but it\u2019s probably not going to happen, at least not overnight, Martin. So what are the other two reasons that productivity has lagged or been so lousy?<\/p>\n<p><strong>Martin Hutchinson:<\/strong> One of them is regulation. The EPA was founded in 1970, and productivity growth sort of went on a sharp downward trajectory in 1973. That suggests there\u2019s a connection between the two and that regulation has dammed the exuberant productivity growth we had postwar.<\/p>\n<p>Regulations, of course, have got more stringent under President Obama. He was very keen regulator in all sorts of areas. That\u2019s good news, really, because regulations are what Trump\u2019s going to reverse. He\u2019s going to deregulate. He\u2019s already pushed two pipelines that Obama had stopped happening, and he\u2019s really going to do a big deregulation effort.<\/p>\n<p>The final possible explanation for productivity lag is funny money. All these zero interest rates that we\u2019ve had since 2008. Because if you\u2019ve got artificial interest rates that are held down way below their natural level, then this affects the investment flow and people invest in rubbish \u2014 huge buildings that don\u2019t get filled and so on.<\/p>\n<p>You can see the effect on China, as well. If they invest in unproductive things, of course that doesn\u2019t do anything for productivity. Austrian economists call this malinvestment. I think this is probably the reason for the big malaise since 2010. The reason I think so is that productivity growth has been bad everywhere with the zero interest rates. It\u2019s been truly terrible in Japan. It\u2019s down in the EU. And it\u2019s been bad in Britain as well. That looks like a possible explanation for the last few years.<\/p>\n<p>Now, Janet Yellen is slowly pushing up interest rates and is showing signs of moving rather faster. Partly because she thinks Trump\u2019s going to be inflationary, I think. That too may be alleviated.<\/p>\n<p><strong>Question:<\/strong> Can you just give us the bottom line on productivity? What can we all expect through your eyes, Martin?<\/p>\n<p><strong>Martin Hutchinson:<\/strong> I think that with deregulation and with interest rates going up a bit faster, productivity growth should leap in 2017 and 2018. Go back to historical levels of around 2%, instead of zero. That will give us faster economic growth, probably of 3% or 4%. And that\u2019s very good news for all of us.<\/p>\n<p>The problem is that if part of it is Janet Yellen raising interest rates, then that\u2019s likely to crash the stock market. But on the other hand, even if our investments don\u2019t do all that well, at least our personal earnings as people will, and there will be lots of job opportunities around at decent wages. For the economy as a whole, this has to be good news.<\/p>\n<p><strong>Question:<\/strong> Amen to that, Martin. Thank you. You mentioned the stock market crash. Can we touch on the possibility of a major correction next week?<\/p>\n<p><strong>Martin Hutchinson:<\/strong> I\u2019d like to talk about that, yes.<\/p>\n<p>Good investing,<\/p>\n<p>Martin Hutchinson<br \/>\nSenior Analyst, <i>Wall Street Daily<\/i><\/p>\n<p>The post <a href=\"https:\/\/www.wallstreetdaily.com\/2017\/02\/07\/productivity-growth-trumps-biggest-challenge\/\" rel=\"nofollow\">Why Productivity Growth Is Trump\u2019s Biggest Challenge<\/a> appeared first on <a href=\"https:\/\/www.wallstreetdaily.com\" rel=\"nofollow\">Wall Street Daily<\/a>.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>By WallStreetDaily.com President Trump\u2019s biggest foe isn\u2019t the liberal media. Nor is it illegal immigrants spilling over a weak U.S. border. It isn\u2019t the Red Army amassing in the South China Sea, either. Oh, and Obamacare looks quite innocent in contrast to the greatest threat to Trump\u2019s presidency. What could possibly be so daunting? It\u2019s [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-101826","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/101826","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=101826"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/101826\/revisions"}],"predecessor-version":[{"id":101837,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/101826\/revisions\/101837"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=101826"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=101826"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=101826"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}